Rewiring Europe - will offshore wind be a "winner"?

Ten European countries in Europe came together in Hamburg earlier this week to sign a commitment to deliver 100GW of offshore wind in the North Sea - a move the German energy minister labelled as "a historic moment for Europe." After a year of failed auctions and cancelled wind projects across some countries in Europe, does this "pact" reveal Europe's commitment to energy independence following President Trump's abuse directed at "loser windmills"?

In this episode, Richard speaks to offshore wind developer Orsted and TSO TenneT about some of the grid integration challenges that the sector needs to overcome, and how proposed interconnectors and bidding zones could work in practice.

Host: Richard Sverrisson - Editor-in-Chief, Montel News

Guests: 

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted

Joana Stirnberg - Coordinator of EU Affairs, TenneT

Hubert Put - Senior Consultant, Montel

Contributor: Andreas Lochner - Germany Editor, Montel News

Editor: Oscar Birk

Producer: Sarah Knowles

Subscribe to the podcast on our website, via Apple Podcasts or Spotify

Transcript

Richard Sverrisson - Editor-in-Chief, Montel News: 0:04

Hello listeners, and welcome to Plugged In - the Energy News podcast from Montel, where we bring in the latest news issues and changes happening in the energy sector. It's been branded the Future Power Hub of the continent, a historic chance for Europe, an escape from the fossil fuel rollercoaster. We are of course talking about Monday signing of the Wind Power Pact in Hamburg, where 10 European countries committed to jointly delivering a hundred gigawatts of North Sea offshore wind power. Seems that Europe has stuck his finger up to Trump and the Trump administration and his loser windmill talk from Davos last week, declaring wind turbines as the winners. But if we look at the detail of what's being proposed, there's many question that needs to be answered. How realistic is this grant collaborative and cross-border plan? Is it financially viable and how is it gonna tackle some of the existing financial challenges to offshore wind projects? Also, how will it be organized in terms of grids, interconnectors, and bidding zones? In this episode, I'll be speaking to offshore wind developer Ørsted, TenneT, the TSO for Germany and the Netherlands, and our own energy expert at Montel. We'll be discussing all these questions and much, much more. But first I'm joined by one of our Germany editors, Andreas Lochner. A warm welcome back to the podcast, Andreas.

Andreas Lochner - Germany Editor, Montel News: 1:24

Yeah. Hi Richard. Thanks for having me.

Richard Sverrisson - Editor-in-Chief, Montel News: 1:26

So we're talking about the wind pack that was signed in Hamburg this week. Can you tell us exactly what was agreed and why it's significant, Andreas?

Andreas Lochner - Germany Editor, Montel News: 1:35

Well, there were several political agreements. The major agreement was about. A hundred gigawatts of offshore wind being built in North Sea, but connected to several countries. So not only one wind farm connected to one country, but sort of a meshed grid where countries can really exchange why are those wind farms? And that's obviously a very new approach when it comes to the policy seen at least nine years ago already. TenneT had proposed something similar also with the scale of a hundred gigawatts, by the way, and offshore island in the North Sea. And now you could say politicians have picked up the idea and come up with a mesh grid of a hundred gigawatts of offshore wind farms connected to several countries, and that's something quite revolutionary because then you can, several markets at the same time can profit from a wind farm. The big challenge will now be to see if we share the benefits, how do we share the burdens of investment?

Richard Sverrisson - Editor-in-Chief, Montel News: 2:34

I think yeah, absolutely. As always, the devil is gonna be in the detail there, but I think that historical perspective is very important Andreas. I think Germany and the German energy minister was certainly very enthusiastic or positive. What is, what's the general view from Germany? Do others share that or are some bit more skeptical

Andreas Lochner - Germany Editor, Montel News: 2:50

in general? The perspective, was quite positive. Many welcomed the idea. Obviously, as you mentioned, the devil is in the details, so let's see how it will actually develop, how much will be built and when. And if how will the agreements actually look at, look like when it comes to the burden sharing, but there's the political will there and that was welcome. There were also some worries regarding the costs because offshore wind, it's costly. And the big question is will it deliver at prices per megawatt hour? So the actual electricity delivered at a price level that really helps us. There were some doubts, like for example, from the Regional Utility Association VKU in Germany. They said it could be actually quite expensive for us. But there were also expectations that, especially when you link those wind farms to several countries that can really benefit the whole of Europe basically.

Richard Sverrisson - Editor-in-Chief, Montel News: 3:46

Exactly. That's also, yeah, that's a that's a very positive sign there. But you know, in particular, Germany struggled to, to get bids for offshore wind tenders. Key lobby group came out this week to say the government will miss its 2030 target of 30 gigawatts. What's the issue here for Germany? And could this pact that we saw signed in Hamburg go some way to, to solve some of those issues?

Andreas Lochner - Germany Editor, Montel News: 4:08

That remains to be seen. But Germany's target towards 2045 is like 70 gigawatts of offshore wind capacity. And that's quite a lot. And the problem is maybe it is too much, so that the wind farms will stand in the way of others, really, so that the wind speeds will diminish because there, there's a shadow. From one windmill to the next to win one turbine to the next. So actually, maybe the targets for Germany, GW wise have to be reduced. Some say to 50 to 60 or so, that they're not so close to each other. And obviously then they expect the output to be quite the same. But obviously when you connect the wind farms from other countries as well, then there's much more potential to have a more steady supply. And so in this sense it will help. When we talk about the short term perspective. I think it doesn't help because obviously those projects take a longer time to build them offshore wind farms, there are massive investments and also require a lot of planning. And I actually haven't seen a detailed timeline on when those a hundred gigawatts will be there. So that again, remains to be seen,

Richard Sverrisson - Editor-in-Chief, Montel News: 5:18

It's just a start. I think that's, it is fair to say there's a lot of detail that needs to be ironed out, but thank you very much, Andreas.

Andreas Lochner - Germany Editor, Montel News: 5:25

Thank you, Richard.

Richard Sverrisson - Editor-in-Chief, Montel News: 5:26

So I'm pleased to introduce Ulrik Stridbæk, head of Regulatory and Public Affairs at Ørsted. Welcome to the Plugged in Podcast, Ulrik.

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 5:33

Thank you very much. Thank you for inviting me.

Richard Sverrisson - Editor-in-Chief, Montel News: 5:35

So it was quite a big announcement this week. On Monday, the signing of the Wind Power Pack to a hundred gigawatts is this kind of Europe saying or responding to Trump's comments about windmills and and saying, actually this form of renewable power production is vital for Europe's energy security?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 5:54

So the statements made yesterday by policymakers had this message between the lines for sure, energy security, Europe taking matters in their own hands. I think we must also remember though, that this is a culmination of a process, a political regulatory visionary that has now been going on for several years. And for us in earth that the most positive signal that was sent yesterday was that we are with these declarations, with these agreements, really in our view signaling that we have the will and the ability to take ambition into real action. It was not so much about the size and the scale of the numbers, but it was the statements about what it will take and how we will do it.

Richard Sverrisson - Editor-in-Chief, Montel News: 6:47

In essence. I mean, we've heard, like you say, that this been, this has been several years coming. We've had massive ambitious targets of 300 gigawatts of offshore wind by 2050 announced before. What's new about Monday's statement?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 6:59

To us, the most positive new signals here and actual commitments is number one, that governments now realize and accept that we will have to share risks in new ways. We will have to, risks are too high for investors like us to take this honor roll. That was number one, accepting that we will need contracts for difference for example. And number two was also to get into the weeds of the industry and realize that we have to plan better. If every country wants all their capacity to come in 2030 or 2035 or 2040, the supply chain will choke up and it will just create inflation unnecessarily and other problems in the supply chain. Risk sharing and planning, that was the real interesting new features in this agreement.

Richard Sverrisson - Editor-in-Chief, Montel News: 7:57

So between countries and also presumably between companies as well.

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 8:00

Certainly between countries, certainly between transmission system operators and on the back of that also, I think we in the industry, we've stood up to this and we have been able to agree among each other that we will then also have to deliver. We will have to commit to investments. We will have to commit to doing things better, scaling up, industrializing, standardizing so that we can get costs down again.

Richard Sverrisson - Editor-in-Chief, Montel News: 8:31

But where are we at the moment Ulrik? We're about 36 gigawatts, aren't we? I think we´ve installed offshore wind capacity in Europe. To reach this target is a phenomenal challenge. Is that target realistic?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 8:43

Actually, it is. Yes. The size, the scale of the supply chain, according to our analysis is that we can build at least 10, maybe even 15 gigawatt per year if it's fully utilized. And certainly in the timeframe that we are lining up here. So this is projects to be built from 2031 to 2040. Yes, there is not a problem to scale up the supply chain to do this. We have the industry, our end of the industry, the developers, we have access to this capital if risks are managed properly and if risk and reward is balanced properly. Yes it is realistic with these timelines and these scale volumes. Yes.

Richard Sverrisson - Editor-in-Chief, Montel News: 9:29

Absolutely. That's very reassuring, I think in, in terms of how would, it's early days, of course, but how would this work in practice? 'cause the grid is organized on a national basis. Here we're looking at the, at more collaborative cross board cooperation between TSOs, would you have a multinational kind of offshore bidding zone, for example, or several of those? Has that been talked about already?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 9:52

All of these things have been talked about for years and have employed a lot of people like me getting into the weeds of regulation and we think is very fascinating. I must say though and it is Ørsted`s view that we do not have time to put up very grand revolutionary schemes that then needs to be developed and implemented in detail. We will have to solve things, also difficult things, but to us it's important first of all, that we get going. We are not picturing, we are not imagining that we will set up huge new institutions that it will take years to agree on and develop. But it does make sense if the countries that have signed this, they do for example, talk with each other about the planning of their tenders. If the supply chain seemed to be fully booked in one year or in, in a number of years. Maybe you want to consider to time the tenders that you put out so that it fits the totality. So having these conversations going, that's very important. Also, on the transmission side, hugely complex. We know this, it is national in nature, but getting some projects going in our view to be in incredibly important. We saw very advanced agreement now between Denmark and Germany on the Bornholm Energy island. That will be a phenomenally important test case. We are seeing agreements between Germany and the UK, a little bit further ahead or further out in time, but also immensely important between the Netherlands and the UK and so on. Speaking about projects, getting projects going, going into those difficult negotiations about turning this into reality. We think that's the way to develop the model rather than developing the ideal world first before we get going.

Richard Sverrisson - Editor-in-Chief, Montel News: 11:53

If it's. 85% good enough, then it's probably good enough to get going. Is that the kind of concept

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 11:58

Good enough is good enough? Yeah. These that matters are too important. We are in too much of a hurry. It is too essential for all of Europe, including non-EU Europe. So we gotta get going, and also just think about the liberalization, the opening of the internal electricity market. That has also been a process. These things are too big, too complicated to figure it out perfectly upfront. So even if we tried to do it, we would not succeed. We would spend a lot of time, we would waste a lot of time, and there would still be problems that we hadn't understood. So let's get going.

Richard Sverrisson - Editor-in-Chief, Montel News: 12:41

Yeah. So get going. And so if I understand you correctly, Ulrik, if there are any cross-border issues that they knew would need to be solved while this project was ongoing?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 12:50

Absolutely. For example, hybrids, where you have offshore wind farms and the necessary interconnectors that we will also need, we have them joined into one asset to save money, to improve efficiency. TSOs tells us that a good part of the offshore wind development should be in the such collaboration projects, and now we are taking that to the next level with the Bornholm Project. By doing that, you are raising issues like bidding zones, congestion rents, pricing, who will bear the cost of the transmission? Who will cover the risk of the offshore wind? What about onshore bottlenecks? What about price zones in countries? We talk a lot about Germany in that regard and so on and so on. There are so many issues and to be able to agree between Denmark and Germany. They have to actually dig into this. I do not think that they will come out of that room with a perfect model, but they will for sure be forced to address some of those problems.

Richard Sverrisson - Editor-in-Chief, Montel News: 13:59

And who will regulate it or oversee it? Is it the commission? Is it gonna be AESA, is it gonna be a selection of national regulators to deal with these issues of congestion management of bidding zones, of pricing, of congestion rents, et cetera, et cetera, which sometimes have been sticking points between TSOs of one country versus another. So how would that be overseen? Do you see now?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 14:22

The only thing I can say for sure about that right now is that we have the institutions that we have, so it will be national regulators. I am sure AESA will have their views for sure. And will the European Commission. In our regard and the way things have unfolded, also with the grids package and a long journey from the European Commission side, the European Commission, they, they at least have people that are sitting and thinking about this very carefully because in our view, what we do know is that a hybrid asset, it is not an interconnector, it is not an offshore wind farm. It's a joint asset. It's put together. And the way we have heard this addressed until now by regulators, to be honest, is a little bit backward looking. Taking the point of departure of the things that we know, the regulation put in place through the market directives to through the market regulations. And in our view, that's simply not enough. These hybrids were not thought of when we conceived the internal energy market. And I think the European Commission, they have at least opened that box and have recognized this and are starting to think about these things in a serious way. But answers are difficult,

Richard Sverrisson - Editor-in-Chief, Montel News: 15:46

of course, and it requires a total change in the mindset. You can't look back at what's happened in the past. You need to look forward at what is the market design that we want for this to succeed. Absolutely, and to utilize that offshore wind. I have a couple more questions, Ulrik. I know your company's been in the news a lot in recent months, especially with the US and et cetera. But what does this kind of collaborative agreement mean for Ørsted?

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 16:09

First of all, it is recognizing two lines under it in bold that Europe will not be able to do what it wants to do in terms of energy security, in terms of decarbonization, saving the climate without offshore wind at a very large scale. That is of course very important for a company like mine who is the world leader and believes in this industry and believes in exactly that, that we can't do without offshore wind. So on a high level, that is the most important. Going a little bit more in detail, zooming in the offshore wind sector has been in trouble. It's been very difficult. Part of this is inflicted by the broad inflation issues we had after COVID. Part of it is probably also self-inflicted with the way, the supply chain. Us on the developer side we have been driving this, but a part of it is also the way governments have been thinking about the offshore wind. It was a mistake in our view to think about offshore wind resources as a source of blunt income. It's just a misconception. The main value of offshore wind is not the income, direct income that you can sweat out of it. As a government, as a ministry of finance, the main valid added value is of course, through the electricity price the electricity production delivered to our citizens, our industries. And this is what was, I think cemented in Hamburg on Monday. This is, in all of you the way the British government has acted all along. They have also made their mistakes. They have also had their problems, but realizing that, for example, we will need offshore wind to fuel a massive increase in electricity demand. Electricity demand with electrification, with decarbonization, that is hugely political. It's politically driven, so that fundamental risk, it is a political risk that we cannot, if you let us on the developer side, manage that risk. We will invest too little and too late. So for Ørsted that these high level realizations and the willingness to go about risk sharing in a different way, that is quite fundamental for us,

Richard Sverrisson - Editor-in-Chief, Montel News: 18:51

Ulrik Thanks very much for being a guest on the Plugged in Podcast.

Ulrik Stridbæk - Head of Global Regulatory & Public Affairs, Ørsted: 18:55

Our pleasure. Our pleasure.

Richard Sverrisson - Editor-in-Chief, Montel News: 18:56

So will the success or failure of this new agreement be at the hands of grid operators, TSOs, the industry and governments? I'm pleased to be joined now by Joana Stirnberg from Dutch TSO, Dutch and German TSO, I should say, TenneTs and a warm welcome to you, Joana.

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 19:13

Thank you very much.

Richard Sverrisson - Editor-in-Chief, Montel News: 19:14

And Hubert Put, analyst from Montel. Warm welcome to you Hubert.

Hubert Put - Senior Consultant, Montel: 19:18

Thank you very much Richard. Nice to be here.

Richard Sverrisson - Editor-in-Chief, Montel News: 19:20

If I start with you, Joana, what what are the key takeaways in your view of Monday's agreement?

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 19:26

The summit itself came at the right time. So it was Trump that was a divorce the week before, which gave a devastating picture in terms of how is the, yeah Europe looking like, how they look at Europe. And how trustworthy actually the US is as a partner when it comes to energy reliance. So it really showed we need to be more independent from third countries. So what do we do here? So this atmosphere of we need to create the North Sea as Europe's powerhouse. So having the ability of serving up to 40% of Europe's whole electricity demand by having this 300 gigawatts installed of wind capacity in the North Sea was was you if you felt it everywhere. So it really said unite as Europe. That is what I would say is the common, it's the overall feeling that you had in this room. This pact that was signed, this North Wind power pack, as you just mentioned between the governments, the TSOs, and also the wind industries really nailed down. Like how do we get there? So from a TSO perspective, it is really about this hundred gigawatt that was set up, which is they call it corporation projects, which is a hundred gigawatts of hybrid interconnectors. So connecting actually a wind farm to two different countries. So the, I think prominent example of this is a line link which connects a Dutch wind farm to the Dutch shore, but also to the UK shore. And also this needs to be, it's important to say probably there's this a hundred gigawatt also includes cross border radials where you have for instance Danish Wind farm that is only being connected to another country. It's not to the hallmark, for instance, just to the German shore instead of the Danish shore. That's what also what we are looking into as TSOs to deliver those concrete projects in order to achieve those a hundred gigawatt.

Richard Sverrisson - Editor-in-Chief, Montel News: 21:16

Fantastic. Joana, I think I'd like to return to some of those issues there. 'cause that hasn't always been such plain sailing in Europe in terms of this sort of a hybrid and these kind of interconnectors. But Hubert what's your view here on, on Monday's PACT that was signed? What do you make of it?

Hubert Put - Senior Consultant, Montel: 21:30

I feel this is a step in the right direction, I would say, but this is only an announcement, so this is a very powerful one, a very, I would say, one that really resonates with strategy with the, something that Europe wants to achieve in the longer term. Nevertheless, as the head of National Energy Agency, Fatih Birol said parole,parole. So words. Words. But we believe in data. So let's see what the future brings, but when it comes to current situation I observed the financial markets, and I must say that the reaction from the financial markets, from the investors is very positive, Vestas and Ørsted. So the companies that were maybe not in dire straits, but they were, I would say, negatively that they had some negative views given the fact of their investment in wind energy over the recent years is say their stocks went up by 4%. So each of the companies, 4% for Ørsted is the highest since the mid September last year. And when it comes to RWE, so the biggest winner of the recent offshore wind auctions in the UK over 2% up, and the wind energy exchange traded fund overall 2% up as well. So I would say the market currently believes that this is something that not only is a strategy words something intangible, but something that can really can fuel the transition and the offshore wind industry to make it better positions in the near future.

Richard Sverrisson - Editor-in-Chief, Montel News: 22:53

And make it more independent from third parties as Joana said as well, to drive that forward to the European energy independence and increase security of supply. That's a very good point Hubert, but at Montel we don't really focus on share prices of companies, but we're very much into the price of electricity. We haven't seen, obviously any reaction. It's far too far in the future to see that yet. But Joana, if I can come back to you and ask you, so this a hundred gigawatt figure, why a hundred gigawatts? And is that really realistic?

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 23:19

Yeah. Let's see why a hundred gigawatt? I think there are various numbers which can be taken in terms of like how much is really needed. I know there, there are other different, the numbers, like for instance there, the offshore network development plan which was announced in 24. Yeah, exactly 24. The last one actually talked about they looked into all 300 gigawatt, but produced less number, less necessity. So it was think about 45 gigawatt. Sorry for that, that they have said earlier. So is hundred really realistic? I find it difficult to give a clear answer. We stand behind that. So we, yes, we are going for that, but we also see a slowdown when it comes to wind offshore capacity and tendering in other countries. We know the Netherlands, they have dropped their numbers how much capacity is needed in 2040 then? So not having 50 gigawatt anymore, but rather 30 to 40 gigawatts. We see that also for Germany. So that's also realism is also from a TSO perspective is necessary here. So that's also with what we are looking for, and that's something that I might want to stress here. This a hundred gigawatt, I'm not sure whether you've seen it, Norway said they're not part of those a hundred gigawatts. It was in the Norwegian press saying we are not supporting this hundred gigawatt because they are afraid of higher electricity prices due to more interconnection to Europe. So that, that is clear. And, but as such, I would say, yeah, realism is key. And what you just said, Hubert, is how can we actually achieve it? There are, and I think this pact, I think needs to be read together with this joint declaration of intent between those five countries. So Germany the Netherlands, Belgium, uk and Denmark about having really concrete projects, hybrid projects about 20 gigawatt to be established at the beginning of the 2030s.

Richard Sverrisson - Editor-in-Chief, Montel News: 25:06

That's crucial, and you made it very clear that we need to work, move away from words towards action. Hubert! And how does that work in practice? We've seen, the offshore wind industry has been really struggling over the last two or three years and not just because of what's happening across the Atlantic, but more to do with the post COVID inflation, the supply chain issues. So how can we transform that number, the words into action Hubert? What's required?

Hubert Put - Senior Consultant, Montel: 25:35

I think that everybody would like to know that, to be fair. And that's,

Richard Sverrisson - Editor-in-Chief, Montel News: 25:39

it is a very tricky question. It is a hundred dollars question. A hundred billion dollar

Hubert Put - Senior Consultant, Montel: 25:42

question. A hundred billion dollar question. Given the fact that the cost, it would be like 200 billion euros, if all of those 100 gigawatts were came to will come to fruition. But this is, let me say far into the future. But yeah, what we saw recently, what we saw from Telen24 were basically the failed auctions. Denmark, Germany, France, it was like a partial success, Netherlands, no bits. However, there is a ray of sunshine in this pouring rain, I would say. So it's not raining cuts and docks anymore in this context. For example, I think the Irland was the first one to actually step and there was granted 900 megawatts of capacity there. Also, it's not a part of the North Sea, obviously, but this is some other emerging markets which is Poland 3.4 gigawatt zero for three projects. It's obviously more pricey because it's emerging market compared to Denmark, UK or Germany where the prices are lower for these projects. Strike prices obviously, and right now a great success, 8.4 gigawatts in the UK. So we need those bold moves. We still need those I would say small yet remarkable successes. And my understanding of the current situation and what the future might bring is that we might need to do one step back when it comes to support schemes. All of those three countries, Ireland, Poland, UK, see if these schemes are there. When it comes to other countries like Germany for example, there was a negative beating scheme there. So maybe we might need to actually make this one step back in order to move two steps forward to achieve these goals and to then make offshore wind let me say more, more mature again in this context. However, it'll be a step back because it'll be a major, I would say contribution from the state. So therefore we need to do this in order to re-accelerate the rollout. And this is what I think needs to be done.

Richard Sverrisson - Editor-in-Chief, Montel News: 27:37

Contracts of difference for those listeners who aren't aware of CFDs, but Joana, what's your view here? Yeah. Is this a way we can really accelerate it, push it forward? What needs to happen?

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 27:46

No, definitely. I totally agree with Hubert here. And also speaking for the Netherlands, they have just, I think it was about two weeks ago, announced that there will also be a tender for the first time, again, not with negative bits, but with subsidies not that's just for one gigawatt, not for two, as they have foreseen earlier. And that will be launched in, I think it will start the tender in 26. But CFD is the way to go and also according to up legislation as of 27, CFD is the new normal, so you don't have any other choice. It must be a CFD. So that's absolutely something that, that is necessary for a kick for, again, for the kicker for the wind industry as such. But not to forget the demand side here, because if there isn't industrial demand, if we don't get the demand on the road together with the wind offshore developing site here, we don't need any wind parks. We don't need any interconnections if we don't have any customers. Also that needs to be streamlined and needs to be pushed forward from the European side, but also from national ministries here or from national governments. 'cause you see a competition. Some countries already give give subsidies. Others don't. You have a rat race.

Richard Sverrisson - Editor-in-Chief, Montel News: 28:56

Yep. I think that's a very important point, Joana. And I think, we're seeing talk of a massive boost in electricity from AI centers, AI in particular. By the time this a hundred gigawatts comes online, it might be far too late. You won't be able to supply these centers. So that's a very important point. But I wanna also turn to a little bit about market design. What's being proposed here is massively ambitious. It's the collaborative and cross-border issues between TSOs, the industry, between governments, that hasn't always been so successful in the past. And you mentioned Norway and the opposition to Interconnectors, that's very strong. So how do you to form a market design concept that actually will work. Do you do it as you go along or do you come with a blueprint first? What, how does that work, Joana?

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 29:38

I'll probably start with giving a practical example because if we're talking about those hybrid offshore interconnectors, they need a separate offshore bidding zone, so they will not be connected to a bidding zone on shore. So there will be a separate one. And there are, that's what we also admitting as TSOs here. There are risks for offshore wind developers for building those wind parks and that need to be mitigated. It also needs to be mitigated in the tenders. Upcoming, so the governments know about that. It's not that easy. There aren't that many customers coming in for this offshore biddings for this offshore bidding zone. What we do or have done in the Netherlands is actually we have proposed a blueprint for offshore bidding zones as the national TSO. And via the Dutch government via the ministry, we actually went into dialogue, stakeholder dialogue with the offshore wind developer, potential offshore wind developers in the Netherlands, such as Ørsted, RWE, BPG, Renext to discuss. There are issues that they're looking into and how can we mitigate those? And that is something that should also, it needs to be done at a more international level. If there are more offshore biddings or hybrid interconnectors are being built, those a hundred being foreseen beginning of 2030s.

Richard Sverrisson - Editor-in-Chief, Montel News: 30:51

So these are huge challenges. Are they not Hubert? Because as well, I think, national governments are elected by their own national people, of course by their own citizens. And if they feel that the neighbors are getting all the benefits, they're gonna get punished for it. So how do you, are there a lot of square pegs and round holes or, how do how do you square that argument Hubert?

Hubert Put - Senior Consultant, Montel: 31:09

So first of all, Joana made a very good argument about the demand side. So obviously we are investing a lot in renewable resources, but we need to remind ourselves that there is this other side because obviously if we build a lot of renewables and there will be no demand. This is a pathway to the negative prices. Negative prices soar across Europe in 2025 immensely, and I'm not talking only about mature markets, Netherlands, Belgium, but also about emerging ones like Romania, Bulgaria, Poland, Hungary, and so on and so forth. So therefore the reason there is this additional cost of building the structure on the demand side, and what I want to underline here is that basically the active ones here will win. So the ones that actually will invest in the battery storage systems, for example, they will utilize the downward price spikes and they will discharge during the times when the system is very short. And obviously a lot of these things are connected to energy management systems. So there needs to be participation from the entire economy. I'm talking industries, I'm talking residentials. I'm talking all the other players on the energy market in order to alleviate the potential to for wholesale prices case. But when it comes to offshore wind, one more thing. It is a technology with actually, according to IDA, the highest LCOE among the solar PV and sho wind two times more for offshore wind. And therefore I think it's also the matter of the social agreement to not build more or a lot more renewables next to households. So it's really, I would say to some extent, an India effect. You don't want to have a lot of wind turbines next to your backyard. There is a price to pay.

Richard Sverrisson - Editor-in-Chief, Montel News: 32:52

But again, as well, I think when you're coming back to the customers, if you provide that sort of low prices to those countries in the five that won't be mentioned. So Germany and Netherlands, Belgium the UK and Denmark, then everyone else will want to join in, I'm sure, but want to join that pact and that agreement. I think that's absolutely crucial and it remains to see how the impact that will have on wholesale prices. Obviously it'd still be very choppy and and dependent on weather, and not least of course wind. Now, but in terms of a technical standpoint, Joana, how will TSOs in this common offshore bidding zone be able to protect against extreme weather, cybersecurity, outages, et cetera? I think the cybersecurity and the risk of attack is certainly very central in people's minds. And how can you pro protect this kind of infrastructure from those kind of dangers?

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 33:44

Yeah. Oh it's always a question, how much can I tell you about security threats? Or what can I share public?

Richard Sverrisson - Editor-in-Chief, Montel News: 33:50

You could tell me, but then you might have to kill me.

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 33:52

Exactly, exactly. That's another step I can take. Absolutely. No of course, we're taking those into consideration already when planning the hybrid interconnector or interconnectors as such, it's really about security by design. So if we're doing this transformator platform which is for two gigawatt in this case this has already been aligned with our supplier, all we are working with. That's one thing. The second thing is probably, also when it comes to the cables, the new ones are being buried in the ground. So they're not, such as for in contrast for gas infrastructure. They're not laying on the seabed and, but they're actually being buried seven meter underground. So they cannot be sabotaged being turned out that easily. Of course we are also working together with coastal guards here. And NATO was present for the first time at the Northeast Summit showing the importance of security. And I think as the North Sea, we can have a look as the best practice bit smaller scale at the Baltic Sea. What have they achieved there to secure our civil and critical infrastructure, and what can we actually take up for the North Sea and yeah, and duplicate here.

Richard Sverrisson - Editor-in-Chief, Montel News: 35:01

The very important points, maybe Hubert wants to say something about the experience in the Baltics. But just before you do here, what I'd like to ask you, will this a hundred gigawatts, a huge amount of electricity, potentially, will it bring prices down for industry and consumers?

Hubert Put - Senior Consultant, Montel: 35:16

So Richard. Basically all will depend on the demand side response actually. And I mean demand side response in the context of how much electricity can be stored. What are the companies that are planning on investing in, for example, energy storage, in demand side response contribution to the market and as well in the energy security. But I want to touch upon this a bit later. So the wholesale prices will be lowered most probably. However we will experience most probably a lot of price spikes, especially during the morning and during the evening peak. However, when it comes to offshore wind, this will actually bring some alleviation, the evening peak, given the fact of the profile generation of the of the wind assets. However. There is a risk that due to massive investment, the critical infrastructure from one half, from technical point of view, so for example, high voltage, direct high voltage and as well the energy security measures. This will take its toll this way or another in this particular tax or another. I can give an example of, for example, Sweden, which recently, due to cyber and physical security risks it led to cancellation of 13 projects there. As well what Joanna mentioned about about lessons learned from the Baltic Sea countries. There's a lot to learn both ways. I would say in this case,

Richard Sverrisson - Editor-in-Chief, Montel News: 36:33

we have got so much to talk about. I could talk here for hours, but we have to bring it to a close now. Joanna, thank you very much for being a guest on the Plugged In podcast and you Hubert as well. So we hope to have you back on soon while we can discuss these issues again and see how the developments have proceeded. So thank you.

Joana Stirnberg - Coordinator of EU Affairs, TenneT: 36:48

Thank you very much. It was a pleasure. Thank you.

Richard Sverrisson - Editor-in-Chief, Montel News: 36:51

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